TABLE OF CONTENTS S.

No 1 Income Support Levy (Wealth Tax) Page No 1

INCOME TAX
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Minimum Tax Regime Filing of Return of Income Wealth Statements Income From Property Changes in rate of Withholding Taxes Regime Exemption & Tax credit withdrawn Salary Income cannot be set off against loss under other head of income credit of source of investment from agricultural income to be allowed to the extent of income on which tax has been paid Retailers to be taxed under normal tax regime power of federal board of revenue to make a scheme for declaration of undisclosed income withdrawn period of finality of provisional assessment passed u/s. 122c reduced A person registered under the sales tax act to be prescribed person collection of information from banks Dividend income received by a company shall cover under the final tax regime compensation to be calculated from the date of refund order Business connection in context of representative of nonresident defined 2 3 4 5 6 7 9 9 9 9 10 10 10 11 11 11

18 19 20 21 22 23 24 25 26 27 28 29

Commissioner empowered to select case of a taxpayer for audit Computerized national identity card allowed to be used in place of NTN Certificates Increase in rate of penalties Advance Tax on functions & gatherings Advance Tax on foreign produced films, TV plays and serials Advance Tax on cable operators and other electronic media Advance Tax on sale to distributors, dealers and wholesalers Advance Tax on sale to retailers Collection of Advance Tax by educational institution First schedule Rate of tax on purchase of motor cars & jeeps enhanced Rate of Advance Tax at the time of sale by auction enhanced

12 12 12 14 14 14 16 16 16 17 19 19

SALES TAX ACT, 1990

30 31 32 33 34 35 36 37 Definitions Scope of Tax Tax Credit not allowed De-Registration, Blacklisting And Suspension of Registration Records Access to record, documents etc. Monitoring or tracking by electronics or other means. Appeals 20 20 21 21 21 21 22 22

38 39 40 41 42 43

Rectification of Mistake Reward to Inland Revenue Officers and Officials Certain Transaction Not Admissible Third Schedule Sixth Schedule Notifications / SROs

22 22 22 23 24 24

FEDERAL EXCISE ACT, 2005

44 45 46 47 48 49 50 Duties Records Appeals Powers of Board or Collector To Pass Certain Orders Reward To Inland Revenue Officers and Officials Monitoring or tracking by electronics or other means. First Schedule 29 29 29 29 30 30 30

NOTES ON FINANCE BILLS 2013

INCOME SUPPORT LEVY At last Wealth Tax is proposed to be re -promulgated but with a new brand name i.e. Income Support Levy. Salient features of the levy are as under: 1- It is to be levied with effect from tax year 2013 2- Levy is to be charged on net movable assets of the individual on the basis of wealth statement filed. 3- Net movable assets mean; movable assets net of liability if any, thereon. 4- Any liability against immovable assets shall not be allowed as deduction in computing net movable assets. 5- Levy @0.5% is to be charged on net movable assets exceeding Rs.1.000M. 6- Default Surcharge @16% per annum will be charged in case of nonpayment of levy. 7- The Levy is to be paid at the time of filing of wealth statement. 8- Appeal against incorrect assessment of levy can be filed as per the provisions of Appeal, Revision or Rectification as provided in the Income Tax Ordinance 2001.

INCOME TAX
Finance Bill 2013 proposes the following amendments in the Income Tax Ordinance, 2001. MINIMUM TAX REGIME The following amendment has been proposed under the minimum tax regime. Rate of Turn over Tax enhanced to 1% Section 113 The rate of minimum tax on turnover was 0.5% till tax year 2010.The same was enhanced to 1% for tax year 2011 & 2012. Subsequently through Finance Bill 2012 the same was reduced to 0.5%. Now, the rate of tax has again been enhanced to 1% of the turnover. Minimum tax on Builders & Land Developers Sections 113A & 113B The existing provisions of sections 113A & 113B of the Income Tax Ord. 2001 deal with the taxation of retailers under the minimum tax regime. Now, through the Finance Bill 2013 the provisions of these sections have been substituted with new provision for incidence of taxation on Builders & Land developers. Builders Section 113A Builders who derive income from the business of construction & sale of residential, commercial or other buildings are proposed to be taxed in the following manner. iMinimum tax to be paid @ Rs.25 per square foot as per the construction or site plan approved by the relevant regulatory authority. ii- Tax has to be computed on the basis of total no. of square feet sold or booked for sale during the tax year. iii- The tax so deducted shall be the minimum tax on income of builders

 Land Developers Section 113B Land developers who derive income from the business of development & sale of residential, commercial or other plots are proposed to be taxed in the following manner. iMinimum tax to be paid @ Rs.50/- per square yard as per the layout or site plan approved by the relevant regulatory authority.

ii- Tax has to be computed on the basis of total no. of square yards sold or booked for sale during the tax year. iii- The tax so deducted shall be the minimum tax on income of land developers FILING OF RETURN OF INCOME The following amendment has been proposed under section 114 of the Income Tax Ordinance, 2001 relating to filing of return of income: Ceiling of commercial & industrial meter bill for filing of return of income reduced Section 114(1)(b)(viii) All the existing industrial & commercial consumers making payment of electrical bills exceeding Rs.1.000M per annum are liable for filing of return of income. Now this ceiling has been reduced from Rs.1.000M to Rs.0.500M. Hence, from now onwards all the industrial & commercial consumers whose annual electric charges exceeds Rs.0.500M will be liable to file return of income. Limit of minimum tax exemption enhanced Section 114(1A) At present minimum limit for exemption from tax for individuals deriving income from salaries is Rs.350,000 and for individuals deriving income from business is Rs.300,000. Through the Finance Bill 2013 both of the limits have been enhanced to uniform ceiling of Rs.400,000, therefore now all those individuals who derive income from any source will have to file return of income if their annual income exceeds Rs.400,000.

Commissioners power to allow time for filing of return curtailed Section 114(4) The Commissioner Inland Revenue has the power to allow time for filing of return to the taxpayers for thirty days or any longer period. Now, the word longer has been replaced with the word lesser. Therefore, now the Commissioner cannot allow extension for filing of return of income for more than thirty days. Written approval of Commissioner mandatory for filing revised return of income Section 114(6) (ba) Written approval of the Commissioner Inland Revenue has been made mandatory for filing of revised return of income. This is an entirely new provision. No such provision was available in the existing law. Persons having only salary income not exceeding Rs.500,000 per annum required to file return of income Section 115(1) Currently the employees having only salary income not exceeding Rs.500,000 per annum are exempt from filing of return of income. Through the finance bill 2013 this concession is proposed to be withdrawn. From now onwards every salaried employee deriving taxable salaries has to file return of income. Salaried employees to file wealth statement and evidence of deduction of tax from salaries Section 118(2A) A new sub section 2A has been inserted in section 118 according to which every salaried individual filing return of income has to file wealth statement with reconciliation and evidence for deduction of tax from salaries along with the return of income. WEALTH STATEMENTS Filing of Wealth Statement made mandatory Section 116(2) & (4) Requirement for filing of wealth statement by an individual has always been linked to the quantum of total income returned by an individual. Through the Finance Bill 2012 the said

income limit was fixed at Rs.1.000M. Now, the Finance Bill 2013 sought to make filing of wealth statement mandatory for every person filing return of income irrespective of the income declared as per return of income for income under Normal Tax Regime or statement filed for income covered under Final Tax Regime. Reason to be given for filing revised wealth statement Section 116(3) Section 116(3) of the Income Tax Ord. 2001 allowed revision of wealth statement filed by an individual. Now through the Finance Bill 2013 an amendment has been proposed according to which the individual has to give reason for such revision. INCOME FROM PROPERTY Prescribed Person for deduction of tax on Income from property widened Section 155(3) Following sectors has been included in the list of persons liable for deduction of tax at the time of making payment of rent irrespective of their status: i) ii) iii) iv) a private educational institution, a boutique or a beauty parlor, a hospital, a clinic or a maternity home; individuals or association of persons paying gross rent of rupees one and a half million and above in a year.

Rate of Tax on Property Income enhanced Rate of tax on income from property alongwith return and for withholding has been increased for individuals, AOP & Companies. In all of these cases the highest rate of tax has been increased from 10% to 17.50%. The proposed rate of tax are as under: a) The rate of tax to be paid withhold in case of individuals and AOP is proposed as under: S.No. Gross amount of rent (1) Where the gross amount of rent does not exceed Rs.150,000. (2) Where the gross amount of rent exceeds Rs.150,000 but does not exceed Rs.400,000. (3) Where the gross amount of rent exceeds Rs.400,000 but does not exceed Rs.1,000,000. Rate of tax Nil 5 per cent of the gross amount exceeding Rs.150,000. Rs.12,500 plus 7.5 per cent of the gross amount exceeding Rs.400,000.

(4)

Where the gross amount of rent exceeds Rs.1,000,000 but does not exceed Rs. 2,000,000

(5) (6)

Rs.57,500 plus 10 per cent of the gross amount exceeding Rs.1,000,000. Where the gross amount of rent exceeds Rs.2,000,000 but Rs.157, 500 plus 12.5 per cent of does not exceed Rs.3,000,000. the gross amount of rent exceeding Rs.2, 000,000. Where the gross amount of rent exceeds Rs.3,000,000 but Rs.282, 500 plus 15 per cent of does not exceed Rs.4,000,000. the gross amount of rent exceeding Rs.3, 000,000.
Where the gross amount of rent exceeds Rs.4,000,000. Rs.432, 500 plus 17.5 per cent of the gross amount of rent exceeding Rs.4, 000,000.;

(7)

b) The rate of tax to be paid/ withhold in the case of company, shall beS.No. (1) Gross amount of rent Rate of tax

Where the gross amount of rent does not exceed 5 per cent of the gross amount of rent. Rs.400,000. Where the gross amount of rent exceeds Rs.20,500 plus 7.5 per cent of the gross Rs.400,000 but does not exceed Rs.1,000,000. amount of rent exceeding Rs.400,000. Where the gross amount of rent exceeds Rs.65,000 plus 10 per cent of the gross Rs.1,000,000 but does not exceeds Rs. 2,000,000 amount of rent exceeding Rs.1,000,000.;

(2)

(3)

(4)

Where the gross amount of rent exceeds Rs.165,000 plus 12.5 per cent of the gross Rs.2,000,000 but does not exceed amount of rent exceeding Rs.2, 000,000. Rs.3, 000,000. Where the gross amount of rent exceeds Rs.290,000 plus 15 per cent of the gross Rs.3,000,000 but does not exceed amount of rent exceeding Rs.3,000,000. Rs.4, 000,000. Where the gross amount of rent exceeds Rs.440,000 plus 17.5 per cent of the gross Rs.4,000,000. amount of rent exceeding Rs.4,000,000.;

(5)

(6)

CHANGES IN RATE OF WITHHOLDING TAXE REGIME [Sections 148, 153(1)(a)(b)(c)] The existing rates of withholding taxes on import, supplies, services, contract & prize on wining have been replaced with the following:

Tax at Import Stage Industrial undertaking Companies Other than industrial undertaking and company Tax on Supplies Companies Other than Companies Tax on Services Companies Other than Companies Tax on Contract Companies Other than Companies Tax on Winning

Existing 5.00 5.00 5.00

Proposed 5.0% 5.0% 5.50%

3.50 3.50

3.50% 4.0%

6.00 6.00

6.0% 7.0%

6.00 6.00 10%

6.0% 6.50% 15.0%

EXEMPTION & TAX CREDIT WITHDRAWN Exemption allowed to Universities & educational institutions withdrawn Clause 92 Part I of Second Schedule The exemption allowed to Universities & educational institutions established solely for the education purpose and not for the purpose of not for profit has been withdrawn. Credit of tax allowed to full time teacher or a researcher employed in a non profit education institution withdrawn Clause 2 Part III of Second Schedule Simultaneous to the withdrawal of exemption of universities & educational institutions not for profit the tax credit @75% available to the full time teacher & researcher of such institution has also been propose to be withdrawn. Exemption limit on Profit on investment in National Saving Schemes, Term Finance Certificates withdrawn Sub Clause (iv)(a) of clause 59 of Part IV of Second Schedule Currently, the profit on Investment in Defence Saving Certificates, Special Saving Certificates, Saving Account or Term Finance Certificates are exempt from tax if the amount

invested in such investments does not exceed Rs.150,000. This exemption is proposed to be withdrawn. Hence from now onwards profit on these investments will be subjected to tax irrespective of the amount invested. Hajj Group Operators to be exempt from operation of certain provisions of the Ordinance Clause 72A of Part IV of Second Schedule This new clause has been proposed to be added in Part IV of the Second Schedule according to which the Hajj Group operators will be exempt from the operation of the following provisions of the Income Tax Ordinance for tax years 2013 &2014: Section 21(l) 113 152 Exempt from Taxation of Payment exceeding Rs.50,000 otherwise than banking channel Payment of minimum tax Deduction of tax from payment to non residents.

However, these exemptions are subject to the condition that the Hajj Group Operators made payment @ Rs.3,500 per hajji for tax year 2013 & Rs. 5,000 per hajji for tax year 2014. Industrial undertakings can obtain certificate for exemption from deduction of tax at import stage Section 148 & Clause 72B of Part IV of Second Schedule The industrial undertakings can avoid payment of income tax at import stage by applying to the Commissioner Inland Revenue concerned for issue of certificate for exemption from deduction of tax. For obtaining such certificate the tax payer has to make the payment of the higher of the determined tax liability for preceding two years. Rate of initial depreciation on Plant & Machinery reduced Clause of Part II Third Schedule The rate of initial depreciation on Plant & Machinery is proposed to be reduced from 50% to 25%.

SALARY INCOME CANNOT BE SET OFF AGAINST LOSS UNDER OTHER HEAD OF INCOME Section 56 (1) The Finance bill 2013 has proposed to withdraw the facility available to a person to set off his salary income against loss during the tax year from any other head of income. Hence, from now onwards a person who despite of loss under a head of income has to pay tax on his salary income for that tax year. CREDIT OF SOURCE OF INVESTMENT FROM AGRICULTURAL INCOME TO BE ALLOWED TO THE EXTENT OF INCOME ON WHICH PROVINCIAL TAX HAS BEEN PAID Section 111 If a person claims agricultural income as a source while explaining the following: i) ii) iii) iv) any investment, any amount credited, ownership of any money or valuable article, funds for making expenditure

then the credit of the said source will be allowed to the extent of agricultural income worked back on the basis of tax paid on agricultural income at the provincial level. RETAILERS TO BE TAXED UNDER NORMAL TAX REGIME Sections 113A & 113B Retailers with turnover less than or more than Rs.5.000M were liable to be taxed under Minimum Tax Regime of the IT Ord. 2001. Now the Finance Bill 2001 has proposed to withdraw this concession from retailers. Hence from now onwards the retailers are liable to be taxed under normal tax regime at normal rate of tax. POWER OF FEDERAL BOARD OF REVENUE TO MAKE A SCHEME FOR DECLARATION OF UNDISCLOSED INCOME WITHDRAWN (Section 120A) Currently, the FBR has been empowered to make any scheme for declaration of undisclosed income. The Finance Bill has proposed to withdraw this power from FBR.

PERIOD OF FINALITY OF PROVISIONAL ASSESSMENT PASSED U/S. 122C REDUCED (Section 122C(2) & Proviso) As per the existing provisions of section 122C of the Income Tax Ordinance 2001a provisional assessment order passed u/s. 122C attained finality after the expiry of sixty days from the date of service of the order. Further, as per the provisos, the person against whom the order is passed under this section if filed his return of income within the given sixty days then the order passed u/s. 122C will not be treated as final. Now it has been proposed to reduce the said period from sixty days to forty five days. A PERSON REGISTERED UNDER THE SALES TAX ACT TO BE PRESCRIBED PERSON Section 153(7)(j) Sub section 7 of section 153 specifies the list of persons who are liable to deduct tax at the time of making the payments covered under section 153. The Finance Bill 2013 has now proposed to add a new category of Person Registered under the Sales Tax Act in this list. Thus every person who is registered under the Sales Tax Act 1990 has to deduct tax from the payments covered u/s. 153 of the Income Tax Ord. 2001 irrespective of its legal status & annual turnover. COLLECTION OF INFORMATION FROM BANKS Section 165A This is a very significant amendment proposed through the Finance Bill 2013. This proposal if approved will result in tremendous increase in powers to the Revenue Officers. According to the proposed amendment every banking company is required to make necessary arrangements to provide to the Board: a) online access to its central database containing details of its account holders and all transactions made in their accounts; b) a list containing particulars of deposits aggregating rupees one million or more made during the preceding calendar month;

c) a list of payments made by any person against bills raised in respect of a credit card

issued to that person, aggregating to rupees one hundred thousand or more during the preceding calendar month;
d) a consolidated list of loans written off exceeding rupees one million during a calendar

year; and
e) a copy of each Currency Transactions Report and Suspicious Transactions Report

generated and submitted by it to the Financial Monitoring Unit under the Anti-Money Laundering Act, 2010 (VII of 2010). These powers to FBR will override the provisions of Banking Companies Ordinance, 1962 (LVII of 1962), the Protection of Economic Reforms Act, 1992 (XII of 1992), the Foreign Exchange Regulation Act, 1947 (VII of 1947) and the regulations made under the State Bank of Pakistan Act, 1956 (XXXIII of 1956). DIVIDEND INCOME RECEIVED BY A COMPANY TO BE COVERED UNDER THE FINAL TAX REGIME Section 169(3) Presently, dividend received by companies is taxed under Normal Tax Regime. Now, it is proposed to cover the same under Final Tax Regime. Hence, the tax deducted at the time of payment on Dividend to the Company will be the full & final discharge of tax in the hand of the recipient company. COMPENSATION TO BE CALCULATED FROM THE DATE OF REFUND ORDER Section 171(2) Compensation for late payment of refund to the taxpayer has to be computed with effect from the date refund order is passed u/s. 170(4) of the Income Tax Ord. 2001. BUSINESS CONNECTION IN CONTEXT OF REPRESENTATIVE OF NONRESIDENT DEFINED Section 172(3)(b) Section 172(3)(b) of the Income Tax Ord. 2001provides that a person who has any business connection with the nonresident person will be treated as representative of the said nonresident

person. Due to absence of any clarity on the term business connection there was always a dispute regarding status of the resident person as a representative. Now in order to resolve this controversy an explanation has been inserted in clause (b) of sub section 3 of section 172 according to which business connection includes transfer of an asset or business in Pakistan by a non resident. COMMISSIONER EMPOWERED TO SELECT CASE OF A TAXPAYER FOR AUDIT Section 177 Section 177 of the Income Tax Ord. 2001always remains in the legal controversy amongst the Revenue & the Tax Payer. After insertion of section 214C the Judicial Authorities through various judgments held that Commissioner has no power to select the case for audit and that only FBR can select a persons case for audit. Now in order to clarify the issue an amendment in shape of explanation has been inserted according to which the powers of Commissioner for selection of case u/s. 177 is independent of powers vested with the FBR provided in section 214C. Therefore a Commissioner Inland Revenue can select a case of a taxpayer for audit. Simultaneous, amendment has been made in section 214C in this regard. COMPUTERIZED NATIONAL IDENTITY CARD ALLOWED TO BE USED IN PLACE OF NTN CERTIFICATES Section 181(3) Individuals have been allowed by FBR to use Computerized National Identity Card issued by NADRA in place of National Tax Number Certificate. INCREASE IN RATE OF PENALTIES Section 182 The Finance Bill 2013 has proposed the following increase in the rates of penalties provided in section 182:

Offence Where any person fails to furnish a return of income as required under section 114 within the due date.

Existing 0.1% of the tax payable for each day of default subject to a minimum penalty of Rs 5,000 and a maximum penalty of 25% of the tax payable in respect of that tax year.

Proposed penalty 0.1% of the tax payable for each day of default subject to a minimum penalty of Rs 20,000 and a maximum penalty of 50% of the tax payable in respect of that tax year.

Where any person fails to furnish a statement as required under section 115, 165 or 165A within the due date

0.1% of the tax payable for Rs 2,500 for each day of each day of default subject to default subject to a minimum a minimum penalty of Rs penalty of Rs 50,000. 5,000 and a maximum penalty of 25% of the tax payable in respect of that tax year.

Where a person fails to furnish 0.1% of the tax payable for Rs 100 for each day of default. wealth statement or wealth each day of default subject to reconciliation statement. a minimum penalty of Rs 5,000 and a maximum penalty of 25% of the tax payable in respect of that tax year. Where a taxpayer who, without any reasonable cause, in non compliance with the provisions of section 177: (a) fails to produce the record or documents on receipt of first notice; (b) fails to produce the records or documents on receipt of second notice; Rs 5,000 Rs 25,000.

Rs 10,000

Rs 50,000

(c) fails to produce the record Rs 50,000 Rs 100,000. or documents on receipt of third notice. (d) Any person who fails to Rs 5,000 for first default and Rs 25,000 for first default and furnish the information Rs 10,000 for each subsequent Rs 50,000 for each subsequent required or to comply with default. default. any other term of the notice served under section 176.

ADVANCE TAX ON FUNCTIONS & GATHERINGS Section 236D A new type of advance tax has been proposed, according to which every prescribed person i.e. the owner, a lease-holder, an operator or a manager of a marriage hall, marquee, hotel, restaurant, commercial lawn, club, a community place or any other place used for the purpose of any function including any wedding related event, a seminar, a workshop, a session, an exhibition, a concert, a show, a party or any other gathering shall collect tax @10% of the amount billed from the person arranging or holding the function. The said prescribed person shall also be liable to collect tax on the bill for food, services or any other facility provided in the said premises for the function by any other person. The person from whom tax is collected under the provision of this section and u/s.148 at the import stage of the said film or drama shall be adjustable. ADVANCE TAX ON FOREIGN PRODUCED FILMS, TV PLAYS AND SERIALS Section 236E According to this proposed insertion any person responsible for censoring or certifying a foreignproduced film, a TV drama serial or a play, for screening and viewing, shall, at the time of censoring or certifying, collect advance tax at the following rates:
(a) (b) (c) Foreign-produced film Foreign-produced TV drama serial Foreign-produced TV play (single episode) Rs. 1,000,000/Rs.100,000/-per episode Rs. 100,000

The person from whom said tax is collected can claim adjustment of the said tax. ADVANCE TAX ON CABLE OPERATORS AND OTHER ELECTRONIC MEDIA Section 236F Pakistan Electronic Media Regulatory Authority, at the time of issuance of license for distribution services or renewal of the license to a licensee, shall collect advance tax at the following rates:

(1) The rate of tax to be collected under section 236F in the case of Cable Television Operator shall be as follows:License Category as provided in PEMRA Rules 2009 H H-1 H-II R B B-1 B-2 B-3 B-4 B-5 B-6 B-7 B-8 B-9 B-10 Type of Channel as provided in PEMRA Rules 2009 IPTV FM Radio MMDS Mobile TV Satellite TV station News or Current Sports Regional Language Health or Agro Education Entertainment Specialized subject station Landing Rights per channel News/Current Affairs Sports Educational Entertainment Children Rs.1,000,000 Rs.500,000 Rs.200,000 Rs.200,000 Rs.350,000 Rs.5,000,000 Rs.2,500,000 Rs.1,000,000 Rs.2,000,000 Rs.1,500,000; Rs.1,000,000 Rs.1,000,000 Rs.700,000 Rs.300,000 Rs.300,000 Rs.1,000,000 Rs.500,000 Rs.2,000,000 Rs.1,000,000 Rs.700,000 Rs.300,000 Rs.300,000 Rs.1,000,000 Rs.200,000 Tax on License Fee Rs.7,500 Rs.10,000 Rs.25,000 Rs.5,000 Rs.5,000 Rs.30,000 Rs.40,000 Rs.50,000 Rs.75,000 Rs.87,500 Rs.175,000 Rs.262,500 Rs.437,500 Rs.700,000 Rs.875,500 Tax on Issuance of license Rs.100,000 Rs.100,000 Rs.200,000 Rs.100,000 Tax on Renewal Rs.10,000 Rs.15,000 Rs.30,000 Rs.30,000 Rs.40,000 Rs.50,000 Rs.60,000 Rs.75,000 Rs.100,000 Rs.150,000 Rs.200,000 Rs.300,000 Rs.500,000 Rs.800,000 Rs.900,000 Tax on Renewal Rs.1,000,000 Rs.100,000 Rs.100,000 Rs.50,000

ADVANCE TAX ON SALE TO DISTRIBUTORS, DEALERS AND WHOLESALERS Section 236G Every manufacturer or commercial importer of electronics, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile, beverages, paint or foam sector, at the time of sale to distributors, dealers and wholesalers, shall collect advance tax @0.1% of the gross amount of sales. The tax so deducted shall be adjustable. ADVANCE TAX ON SALE TO RETAILERS Section 236H Every manufacturer, distributor, dealer, wholesaler or commercial importer of electronics, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile, beverages, paint or foam sector, at the time of sale to retailers, shall collect advance tax 0.5% of the gross amount of sales. The tax so deducted shall be adjustable. COLLECTION OF ADVANCE TAX BY EDUCATIONAL INSTITUTION Section 236G Every educational institution, where annual fees exceeds Rs.200,000 per annum at the time of preparing fees voucher shall collect tax @ 5% of the amount of fees in the manner the fees is collected. The tax so collected shall be adjustable against the tax liability of either of the parents or guardian making payment of the fees.

FIRST SCHEDULE

RATE OF TAX FOR INDIVIDUALS Business & Other Individuals i) The taxable limit for income from business & profession has been enhanced from Rs.300,000 per annum to Rs.400,000 per annum. ii) Slab rates have been increased from existing 5 to 7. iii) Maximum rate of tax enhanced from 25% to 35% Proposed rate of tax are as under:
S. No. 1. Taxable Income. Rate of Tax

Where taxable income does not exceed

400,000

0%

2.

Where the taxable income exceeds Rs.400,000 but 10% of the amount exceeding does not exceed Rs.750,000 Rs.400,000/Where the taxable income exceeds Rs.750,000 but Rs. 35,000 + 15% of the does not exceed Rs.1,500,000 amount exceeding Rs. 750,000/Where the taxable income exceeds Rs.1,500,000 but Rs. 147,500 +20% of the does not exceed Rs.2,500,000 amount exceeding Rs. 1,500,000. Where the taxable income exceeds Rs.2,500,000 but Rs. 347,500 + 25% of the does not exceed Rs.4,000,000/amount exceeding Rs. 2,500,000/Where the taxable income exceeds Rs.4,000,000 but Rs. 722,500 + 30% of the does not exceed Rs.6,000,000/amount exceeding Rs. 4,000,000/Where the taxable income exceeds Rs.6,000,000/Rs. 1,322,500 + 35% of the amount exceeding Rs.6,000,000

3.

4.

5.

Salaried Individual i) The taxable limit for income from Salaries has been enhanced from Rs.350,000 per annum to Rs.400,000 per annum. ii) A slab rate has been increased from existing 6 to 12. iii) Maximum rate of tax enhanced from 20% to 30% Proposed rate of tax are as under:

S.No. 1. 2. 3.

Taxable Income. Where the taxable income does not exceed Rs.400,000, 0%

Rate of tax.

Where the taxable income exceeds Rs.400,000 but 5% of the amount exceeding does not exceed Rs.500,000 Rs. 400,000 Where the taxable income exceeds Rs.500,000 but Rs.5,000 + 7.5% of the does not exceed Rs.800,000, amount exceeding Rs.500,000/Where the taxable income exceeds Rs.800,000 but Rs.27,500 + 10% of the does not exceed Rs.1,300,000, amount exceeding Rs.800,000/Where the taxable income exceeds Rs.1,300,000 but Rs.77,500 + 12.5% of the does not exceed Rs.1,800,000, amount exceeding Rs.1,300,000/Where the taxable income exceeds Rs.1,800,000 but Rs.140,000/- + 15% of the does not exceed Rs.2,200,000/amount exceeding Rs.1,800,000 Where the taxable income exceeds Rs.2,200,000 but Rs.200,000/- + 17.5% of the does not exceed Rs.2,600,000/amount exceeding Rs.2,200,000/Where the taxable income exceeds Rs.2,600,000 but Rs.270,000/- + 20% of the does not exceed Rs.3,000,000/amount exceeding Rs.2,600,000/Where the taxable income exceeds Rs.3,000,000 but Rs.350,000/- + 22.5% of the does not exceed Rs.3,500,000/amount exceeding Rs.3,000,000/Where the taxable income exceeds Rs.3,500,000 but Rs.462,500/- + 25% of the does not exceed Rs.4,000,000/amount exceeding Rs.3,500,000/Where the taxable income exceeds Rs.4,000,000 but Rs.587,500 + 27.5% of the does not exceed Rs.7,000,000/amount exceeding Rs.4,000,000/Where the taxable income exceeds Rs.7,000,000/Rs.1,412,500/- + 130% of the amount exceeding Rs.7,000,000/-

4.

6.

10

11

12

RATE OF TAX ON COMPANIES REDUCED BY 1% First Schedule Part I Div. II Rate of tax for Companies other than Banking Companies has been reduced by 1% from 35% to 34% for the tax year 2014. RATE OF WITHHOLDING TAX ON CASH WITHDRAWAL INCREASED (Section 231A & Division VI of Part IV of First Schedule) The rate of tax on cash withdrawal increased from 0.2% to 0.3%.

RATE OF TAX ON PURCHASE OF MOTOR CARS & JEEPS ENHANCED Section 231B The rate of tax on payment of advance tax at the time of purchase of Motor Cars & Jeeps has been enhanced. The proposed new rate of tax are as under:
DIVISION VII PURCHASE OF MOTOR CARS AND JEEPS The rate of payment of tax under section 231B shall be as follows: Engine capacity upto 850cc 851cc to 1000cc 1001cc to 1300cc 1301cc to 1600cc 1601cc to 1800cc 1801cc to 2000cc Above 2000cc Amount of tax Rs.10,000 Rs.20,000 Rs.30,000 Rs.50,000 Rs.75,000 Rs.100,000 Rs.150,000;

RATE OF ADVANCE TAX AT THE TIME OF SALE BY AUCTION ENHANCED Section236A The rate of advance tax at the time of sale by auction has been proposed to be enhanced from 5% to 10% of the gross sale price of any property or goods.

SALES TAX ACT, 1990

Following amendments have been proposed in the Sales Tax Act, 1990 with effect from 1st July, 2013 or as date mentioned in the provisions or schedule as below; DEFINITIONS Section 2 CREST Section 2(5AC) The sub section in definition is introduced to give effect of computerized risk based evaluation of sales. PROVINCIAL SALES TAX Section 2(22A) The sub section in definition section is introduced to define Islamabad Capital Territory. SUPPLY CHAIN Section 2(33A) This definition introduced to give legal cover of investigation and disallowance of input tax of supply chain. SALES TAX TO BE CHARGED ON PAYMENT RECEIVED AS ADVANCE AGAINST SALES Section 2(44) After the aforesaid amendment any payment received in advance has to be taxed in the month such advance is received. SCOPE OF TAX Section. 3 w.e.f June 13, 2013 It is proposed that the rate of sales tax shall increased from existing 16% to 17% with effect from June 13, 2013. The concept of further tax has been reintroduced according to which every taxpayer has to charge additional sales tax at the rate of two percent on supplies to un-registered persons.

It further proposed in amendment of the section that board may levy and collect tax on the basis of production capacity or on fixed basis. TAX CREDIT NOT ALLOWED Section 8 It is proposed to amend this section and after amendment taxpayer will not be allowed to take input tax of purchases which is not verifiable from CREST or in the supply chain. After proposed amendment all the buyers in said supply chain will not be entitled of input tax if any one of the suppliers input is not verifiable. DE-REGISTRATION, BLACKLISTING AND SUSPENSION OF REGISTRATION Section 21 After proposed amendment, buyer will not get input tax credit even if payment is made through banking channel if the supplier de-registered, blacklisted or suspended. Further proposed amendment in this section that the Board, Commissioner or officer authorized by the Board has the discretionary powers to block refunds or disallow input tax adjustments and further investigation and legal action against the registered person who, in belief of Commissioner or Officer, may involve in issuing fake or flying invoices, claiming fraudulent input tax or refunds, does not physically exist or does not conduct actual business or has committed any fraudulent activity. RECORDS Section 22 After proposed amendment, taxpayer has to keep gate passes, inward or outward and transport receipts as part of the record in addition to other documents as described in said section and taxation officer can call for the same while auditing or otherwise. ACCESS TO RECORD, DOCUMENTS ETC. Section 25, 38, 38A,38B It proposed to insert explanation in this section and remove doubt that the Board, Commissioner or officer of Inland Revenue has inherent power of audit, access record and documents, access to

premises, stocks, accounts, call for information and this power is not restricted by section 72B which empower Board to select the cases for audit. MONITORING OR TRACKING BY ELECTRONICS OR OTHER MEANS. Section 40C It is proposed to insert new section which empower Board to authorize any officer for

monitoring or tracking of production sales, clearances, stocks or any other related activity of the registered person or class of registered persons or any goods or calls of goods through electronic or other mans as prescribed by the Board. Furthermore, board also may prescribe to affix tax stamp, banderole, stickers labels on taxable goods. APPEALS Section 45B It is proposed to give power to Commissioner Appeal to grant stay of maximum 30 days in hardship cases. RECTIFICATION OF MISTAKE Section 57 There was no provision of rectification of mistake in the order, after proposed amendment the Commissioner, The Commissioner Appeals or the Appellate Tribunal through an order in writing may amend any order made by him to rectify any mistake apparent from the record but no adverse effect on taxpayer. This amendment is in line with the corresponding provisions of Income Tax Ordinance, 2001. REWARD TO INLAND REVENUE OFFICERS AND OFFICIALS Section 72C It is proposed to introduce Reward to Inland Revenue Officers who involve in detection of concealment or evasion of Sales Tax and other taxes. CERTAIN TRANSACTION NOT ADMISSIBLE Section 73 This proposed amendment is to give legal cover of requiring bank information with sales tax registration form and any change at later stage.

THIRD SCHEDULE Section 3(2)(a) Following further goods are included on which sales tax is to be charged on retail price; Finished or made-up articles of textile and leather, including garments, footwear, and bed ware, sold in retail packing Household electrical goods, including air conditioners, refrigerators, deep freezers, televisions, recorders and players, electric bulbs, tube-lights, fans, electric irons, washing machines and telephone sets Household gas appliances, including cooking range, ovens, geysers and gas heaters Foam or spring mattresses, and other foam products for household use Auto parts and accessories sold in retail packing Lubricating oils, brake fluid, transmission fluid, and other vehicular fluids and maintenance products in retail packing Tyres and tubes Storage batteries Arms and ammunition Paints, distempers, enamels, pigments, colours, varnishes, gums, resins, dyes, glazes, thinners, blacks, cellulose lacquers and polishes sold in retail packing Fertilizers Cement sold in retail packing Tiles sold in retail packing Biscuits, confectionary, chocolates, toffees and candies

Other goods and products sold in retail packing (other goods means all such product which are packed in retail pack whether specifically included in list of this schedule or not)

SIXTH SCHEDULE Section 13(2)(a) Following supplies are excluded from exemption of Sales Tax; Milk preparations obtained by replacing one or more of the constituents of milk by another substance, whether or not packed for retail sale. Supplies against international tender.

NOTIFICATIONS

Following Notifications have been rescind with effect from June 12, 2013; SRO 863(I)/2007 issued on dated 24th August 2007:Zero rated sales tax on raw material, components, sub-components, sub-assemblies and assemblies on imported and purchase locally for manufacture of goods of various goods as mentioned in this SRO has been withdrawn. SRO 117(I)/2011 issued on dated 10th February, 2011:Facility of reduce rate of sales tax to Khyber Paktunkhwa, FATA, PATA is withdrawn. Following Notifications issued and applicable from June 13, 2013; SRO 501(I)/2013 dated 12th June, 2013:Under this SRO following goods exempt from whole of sales tax on the import and supplies;

S. No. (1) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25.

Description (2) Uncooked poultry meat (PCT Heading 02.07). Milk and cream (PCT headings 04.01 and 04.02). Flavored Milk (PCT Headings 0402.9900 and 22.02). Yogurt (PCT Heading 0403.1000). Whey (PCT Heading 04.04). Butter (PCT Heading 0405.1000). Desi ghee (PCT Heading 0405.9000). Cheese (PCT Heading 0406.1010). Processed cheese not grated or powdered (PCT Heading 0406.3000). Cotton seed (PCT heading 1207.2000). Frozen, prepared or preserved sausages and similar products of poultry meat or meat offal (PCT Heading 1601.0000). Meat and similar products of prepared frozen or preserved meat or meat offal of all types including poultry meat and fish (PCT Headings 1602.3200, 1602.3900, 1602.5000, 1604.1100, 1604.1200, 1604.1300, 1604.1400, 1604.1500, 1604.1600, 1604.1900, 1604.2010, 1604.2020, 1604.2090, 1604.3000). Preparations for infant use, put up for retail sale (PCT Heading 1901.1000). Fat filled milk (PCT Heading 1901.9090). Soyabean meal (PCT Heading 2304.0000). Oil cake and other solid residues, whether or not ground or in the form of pellets (PCT heading 2306.1000) Colours in sets (Poster colours) (PCT Heading 3213.1000). Writing, drawing and marking inks (PCT Headings 3215.9010 and 3215.9090). Erasers (PCT Headings 4016.9210 and 4016.9290). Exercise books (PCT Heading 4820.2000). Directly reduced iron (PCT heading 72.03). Pencil sharpeners (PCT Heading 8214.1000). Energy saver lamps (PCT heading 8539.3910). Sewing machines of the household type (PCT Headings 8452.1010 and 8452.1090). Purpose built taxis, whether in CBU or CKD condition (PCT Headings 8703.3226 and 8703.3227) which are built on girder chassis and having following features, namely:(a) Attack resistance central division along with payment tray; (b) Wheelchair compartment with folding ramp; and (c) Taximeter and two-way radio system. Bicycles (PCT Heading 87.12). Wheelchairs (PCT headings 8713.1000 and 8713.9000). Vessels for breaking up (PCT heading 89.08) Other drawing, marking out or mathematical calculating instruments (geometry box) (PCT Heading 9017.2000). Pens and ball pens (PCT Heading 96.08). Pencils including colour pencils (PCT Heading 96.09). Compost (non-chemical fertilizer) produced and supplied locally Construction materials to Gawadar Export Processing Zones investors and to Export

26. 27. 28. 29. 30. 31. 32. 33.

Processing Zone Gawadar for development of Zones infrastructure. SRO 502(I)/2013 dated 12th June, 2013 with effect from June 13, 2013:Under this SRO following goods were charged sales tax at zero rate, however, after amendment these goods are not exempted; Cotton seeds (PCT Heading 1207.2000); Oil cake and other solid residues, whether or not ground or in the form of pellets (PCT Heading 2306.1000) Compost (non-chemical fertilizer) Energy Saver lamps PCT Heading8539.3910 Construction materials to Gawadar Export Processing Zone's investors and to Export Processing Zone Gawadar for development of zone's infrastructure. Wheel chair Cotton seed oil

SRO 503(I)/2013 dated 12th June, 2013 with effect from June 12, 2013 Amendment in SRO 993(I)/2006:This notification withdrawn the composite repayment-cum-drawback of sales tax and federal excise duty to the registered person on the export from Pakistan of vegetable ghee, cooking oil and margarine.
FINISHED CONSUMER GOODS OF FIVE EXPORT-ORIENTED SECTORS SRO 504(I)/2013 Amendment in SRO 1125(I)/2011 dated December 31, 2011 [Effective June 12, 2013]-

In terms of SRO 1125(I)/2011 dated December 31, 2011 [as amended from time to time] a reduced rate of 2 per cent / 5 per cent is applicable inter alia on local sales of articles covered by five export-oriented sectors i.e. textile, carpets, leather, sports and surgical goods. Through the subject notification, with effect from June 12, 2013, the concession has been restricted to goods other than finished articles. Consequently, the local sale of these finished articles such as garments now attracts sales tax at the rate of 17 per cent.

List of items excluded from SRO 1125(I) of 2011:

Entry of Table in SRO 1125(I)/2011 01 Finished

Description articles of leather

PCT Heading and Chapter 41 and heading 64.06 Chapters 50, 51, 52, 53, 54 (excluding 5407.2000), 55, 56 (excluding 56.08 and 56.09), 57 (excluding made ups), 58, 59 (excluding 59.05, 59.10) and 60

artificial leather 02

Following items relating to textile and articles thereof: (a) finished articles of textiles and textile made-ups (b) mono-filament of more than 67 decitex (c) sun shading (d) fishing net of nylon or other material (e) rope of polyethylene or nylon (f) tyre cord fabric

3 6 7 56

68

Chapter 57 excluding made ups) Respective headings excluding Sports goods in finished condition finished goods. Respective headings excluding Surgical goods in finished condition finished goods Master batches relating to other 3206.4900 colouring matter and other preparations Shoe adhesives 3506.9110 Carpets in finished condition

SRO 505(I)/2013 dated 12th June, 2013 with effect from June 13, 2013 Amendment in Sales Tax Special Procedure (Withholding) Rules, 2007, SRO 660(I)/2007:Previously withholding agent such as Companies and persons registered as exporter were not required to deduct withholding sales tax from the payment of supplies from un-registered persons. After this notification, Companies and persons registered as exporter are also required to withhold whole of sales tax at prevailing sales rate from payment of purchases from unregistered persons. The amount of sale tax for the purpose of this rule shall be worked out on the basis of gross value of taxable supply.

SRO 506(I)/2013 dated 12th June, 2013 with effect from June 13, 2013 Amendment in Sales Tax Rules, 2006:After this notification, corporate or non-corporate persons jurisdiction will be the placed where manufacturing unit or business premises is located. In case of multiple manufacturing units or business premises, the Board may decide the place of registration of such persons. Chapter VIIA in respect supplies against International Tender is omitted as such these supplies are no more exempted supplies. SRO 509(I)/2013 and SRO 510(I)/2013 dated 12th June, 2013 with effect from June 13, 2013 Amendment in Sales Tax Rules, 2006:After notification, every consumer of electricity having an industrial or commercial connection and the bill for a month in excess of rupees fifteen thousand and consumer not providing his sales tax registration or not shown as active on Active Taxpayers List then he will be charged extra 5% Sales Tax in addition to current rate of sales tax. Taxpayer has to declare his all places of business and also provide same to Electricity Company to incorporate sales tax registration number in billing system.

FEDERAL EXCISE ACT, 2005

APPLICABILITY DATE? Following amendment has been proposed in the Federal Excise Act, 2005 with effect from 1st July, 2013 or as date mentioned in the provisions or schedule as below; DUTIES Section. 3 Further tax reintroduced and now taxpayer has to be charged additional FED at the rate of two percent on supplies to un-registered persons. RECORDS Section 17 After proposed amendment, taxpayer has to keep gate pass, inward or outward and transport receipts as record in addition to other documents as described in said section and taxation officer can check such record while audit and otherwise. APPEALS Section 33 It is proposed to give power to Commissioner Appeal to grand stay of maximum 30 days in hardship cases. POWERS OF BOARD OR COLLECTOR TO PASS CERTAIN ORDERS Section 35,45 and 56 It proposed to insert explanation in this section and remove doubt that the Board, Commissioner or Officer of Inland Revenue has inherent power of audit, access record and documents, access to premises, stocks, accounts, call for information and this power is not restricted by section 42B which empower Board to select the cases for audit.

REWARD TO INLAND REVENUE OFFICERS AND OFFICIALS Section 42C It is proposed to introduce reward to Inland Revenue Officers who are involve in detection of concealment or evasion of FED and other taxes. MONITORING OR TRACKING BY ELECTRONICS OR OTHER MEANS. Section 45A It proposed to insert new section which empower Board to authorize any officer for monitoring or tracking of production sales, clearances, stocks or any other related activity of the registered person or class of registered persons or any goods or calls of goods through electronic or other mans as prescribed by the Board. Furthermore, board also may prescribe to affix tax stamp, banderole, stickers labels on taxable goods.

FIRST SCHEDULE In table I of the first schedule following amendment; i. ii. iii. Aerated waters Aerated waters, containing added sugar or other sweetening matter or flavored Aerated waters if manufactured wholly from juices or pulp of vegetables, food grains or fruits and which do not contain any other ingredient, indigenous or imported, other than sugar, coloring materials, preservatives or additives in quantities prescribed under the West Pakistan Pure Food Rules, 1965. Locally produced cigarettes if their on pack printed retail price exceeds rupees two thousand two hundred and eighty six per thousand cigarettes Locally produced cigarettes if their on pack printed retail price does not exceed rupees two thousand two hundred and eighty six per thousand cigarettes Locally produced cigarettes if their retail price does not exceed ten rupees per tencigrettes Raised rate of FED to 9% Raised rate of FED to 9% Raised rate of FED to 9%

iv.

Rupees two thousand three hundred and twenty five per thousand cigarettes Rupees eight hundred and eighty per thousand cigarettes Deleted from the schedule, hence, no more FED or

v.

vi.

vii. viii.

Franchise services Oilseeds Forty paisa per kg Motor cars, SUVs and other motor vehicles Ten per cent ad.val.; and of cylinder capacity of 1800 cc or above, principally designed for the transport of persons (other than those of headings 87.02), including station wagons and racing cars of cylinder capacity of 1800 cc or above. Table II

i.

ii.

Services provided or rendered in respect of insurance to a policy holder by an insurer, including a re-insurer [in case where direct insurance service has been provided.] Services provided or rendered by banking companies, insurance companies, cooperative financing societies, modarabas, musharikas, leasing companies, foreign exchange dealers, non-banking financial institutions, Assets Management Companies and other persons dealing in any such services.

Deleted from the schedule, hence, no more FED on Insurance. Sixteen per cent of the charges

Third Schedule Exemption from FED Proposed withdrawn exemption on following items; i. Hydraulic cement imported or purchased locally by petroleum or energy sector companies or projects subject to the same conditions and procedures as are applicable for the purposes of exemption of customs duty. ii. Lubricating oil if supplied to Pakistan Navy for consumption in its vessels iii. Transformer oil if used in the manufacture of transformers supplied against international tenders to a project financed out of funds provided by the international loan or aid giving agencies. Table II by Asset

i.

Services

provided

Management

Companies with effect from 1stof July, 2007.